Last post: Nov 25, 2021
Black Friday is the most important time of year for any online company, and this year the challenges are heightened with extraordinary impacts on the global supply chain. To cover these working capital issues, we talk to our clients about Merchant Cash Advances (MCAs) as a great, flexible solution to help these businesses meet the demand and thrive.
Here's how it works.
MCA's are revenue-based financing. What this means is that the lender will assess your business using analytics - based on that they can then send you cash to make inventory purchases or investments in your company. You then repay the finance provider using a % of your revenue. You use your revenue, to get financing.
Why is Revenue Based Financing the best funding option for eCommerce?
Revenue-based financing is perfect for eCommerce companies. It solves your cash flow issues and lets you grow faster without a lot of the drawbacks of traditional funding options. Let's take a look at some of the other options.
*Some founders can use their own funds to grow their business. But most founders don't have this option and if your company is growing fast, it becomes almost impossible to fund your growth using your own funds.
*When you bring on investors in exchange for shares in your business, you are giving up a share of all future profits. This may seem like a good deal in the short term but can often turn out to be a very expensive way to fund your business. You also give up some control over your business. With revenue-based financing, you keep full ownership of your business, not giving up any control or any share of your future profits.
*Bank loans usually ask you to put up collateral (which is very difficult for most eCommerce companies). They also have very long application and legal processes. This makes Bank Loans very hard to access for eCommerce companies, especially when you need the cash fast.
A final advantage of Revenue Based Financing is that it keeps your risk low. Because you make repayments as a % of your sales, if you have a slow month, you will just pay back less. This is not the case with bank loans or other traditional forms of finance.
Sound good? Get in touch with us at Choice Business Loans so we can discuss how this option might work for your business.
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